Protecting Generational Wealth During Your Divorce

June 14, 2022

Protecting Generational Wealth During Your Divorce

Generational wealth includes assets of value that are passed from one generation of a family to the next. This can include cash, fine art, real estate, vehicles, and more. When one or more generations have worked hard to build this wealth, the family usually wants to protect it from anything that might deplete it. Creditors, lawsuits, and divorces are three potential threats to a family’s generational wealth. Fortunately, there are steps that you can take for protecting generational wealth during your divorce. To ensure that these steps are seen as protecting your wealth and not something else, it is important to make sure you handle them appropriately. If you are considering a divorce (or are about to get married but concerned about a possible future divorce), consider calling the experienced family law attorneys at Johnson Law Group at (720) 730-4558 to discuss your legal options.

Why Would You Need to Protect Generational Wealth During Your Divorce?

Whether it is wealth that has been passed down to you from your parents or grandparents or is wealth that you have built yourself and want to see passed down to your own children and grandchildren, generational wealth is meant for the family that earned it. If your wealth comes from the generations before you, you may strongly feel that your former spouse is not entitled to benefit from it after your divorce even if you share children together. If you have earned that wealth, you may still have reasons for believing that it is in your family’s best interests to ensure that your former spouse does not have access to it. Some reasons that you may want to protect generational wealth from a former spouse include:

  • It does not belong to just you – Wealth passed down from your parents or grandparents may not be yours alone. You may be sharing those assets with siblings, cousins, aunts, uncles, and other extended family members who could be impacted by your spouse’s claim on the assets.
  • Spouse is bad with money – You may want your children to benefit from the family’s wealth but know that your spouse is not good with money. He or she may spend extravagantly on things that are not necessary or might not keep track of money spent. He or she may have gambling issues, drug addictions, or other things that make you concerned that he or she would sell expensive assets.
  • Spouse has debts or judgments – If your former spouse has debts or judgments, creditors and courts can attach liens or garnish anything of value that he or she owns. This means that if your spouse gets a chunk of your family’s wealth, creditors or courts may take it to satisfy the money owed and your children may never benefit from the wealth the way you intended.

How you protect your generational wealth depends on where the wealth comes from, when you are protecting it, and whether your spouse is willing to agree to the terms of protection. Fortunately, there are several potential ways to protect your assets.

Prenuptial Agreements

A prenuptial agreement, also called a premarital agreement, is defined by the Colorado Legislature as an agreement between two people who plan to marry that affirms, modifies, or waives one or more marital rights or obligations during the marriage, upon legal separation or divorce, at the death of one of the spouses, or another event as defined in the agreement. It also includes any amendments to the agreement made before the couple marries. Most people understand a prenuptial agreement as a document that specifies what one or both spouses get and/or do not get in the event of a divorce.

When carefully considered and drafted, a prenup can protect your family’s generational wealth while also meeting both spouses’ needs. It can be used to ensure that the assets owned by one spouse prior to the marriage and/or assets received during the marriage through an inheritance or trust distribution, are solely kept by that spouse. It can also protect any appreciation in value of those assets if such appreciation occurs during the marriage.

Post-Nuptial Agreements

A post-nuptial agreement is the same as a prenuptial agreement but it is signed after the couple has married. It is often used when one of the spouses accumulates substantial wealth after the marriage in a way that neither spouse anticipated at the time of the marriage. This could occur because one spouse started a business or received an unexpected inheritance. It can be more difficult to persuade a spouse to sign a post-nuptial agreement in some cases.

To be enforceable, a post-nuptial agreement must be:

  • Created and signed before divorce proceedings are filed.
  • Entered into voluntarily.
  • Clearly outline the rights being waived.
  • Not violate any laws.
  • Include adequate disclosures of finances.
  • Include reasonable terms.
  • Be in writing and signed by both parties.

In addition, both parties need to have been given ample time to review the agreement and be sure they want to sign it. The post-nuptial agreement only becomes effective once both parties have signed it which means that you do not want to delay drafting and signing the agreement once you realize you need an option for protecting generational wealth during your divorce.


Asset protection trusts are a way to prevent non-marital assets from becoming mingled with marital assets. Trusts take assets out of your control and places them in a trustee’s control with clear instructions on how to distribute those assets. You, your children, or other family members can be beneficiaries of a trust.

A trust can be used for non-marital property owned before the marriage or for property acquired through an inheritance after the marriage. However, the trust does need to be set up properly to ensure that the property stays separate. The Colorado Bar Association outlines three different ways that trusts can be set up, each of which has a different impact on whether or not the assets in the trust are considered separate or not. If you want to set up a trust, or already have a trust but are not sure how it is structured, the qualified attorneys at Johnson Law Group can go over the details with you.

Family Business By-Laws

Sometimes the wealth you want to protect is produced by a thriving family business. Without proper protections in place, a successful family business and the wealth it generates can be exposed in a divorce when one of the divorcing spouses holds an interest in the business.

Fortunately, it is possible to prevent this. With the integration of provisions into a business’s by-laws, you can shield business interests from being subject to distribution to a non-titled spouse in a divorce. Whether you are trying to create these by-laws when the business is being created, or at some future point, it is likely that you will need the assistance of an experienced attorney to do so.

Is Your Family Wealth Protected?

Protecting generational wealth during your divorce does not have to be difficult. From before the marriage begins until you have filed for divorce, there may be options you can use to ensure the money and other assets your family has worked so hard for do not get included in marital property. If you want to make sure your generational wealth is protected in the event of a divorce, contact the experienced family law attorneys at Johnson Law Group at (720) 730-4558 to discuss your legal options.

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Written by Family Law Attorney Myles S. Johnson
Divorce doesn’t have to be dramatic. For the litigants, losing your spouse is significant enough. But you can choose the way it affects your daily life. The only guarantee I can give is that the feeling that you have right now will not be the feeling you end with. This is a season in your life, and it must be approached that way.
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